[Federal Register Volume 59, Number 51 (Wednesday, March 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6037]


[[Page Unknown]]

[Federal Register: March 16, 1994]


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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-33745; File No SR-CBOE-94-03]

 

Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by the Chicago Board Options Exchange, Inc. Relating to Trading 
Floor Booth Policy and Fee Changes

March 9, 1994.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''), 15 U.S.C. 78s(b)(1), notice is hereby given that on February 
2, 1994, the Chicago Board Options Exchange, Inc. (``CBOE'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the CBOE. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange is proposing to set forth formally the Exchange's 
current policy regarding the rental of booths on the CBOE trading floor 
(``Policy''). The CBOE has included with the filing, for informational 
purposes, a copy of the CBOE Trading Floor Booth Rental Agreement 
(``Agreement''), which has been reformulated in conjunction with the 
formalization of this Policy. That Agreement sets forth the contractual 
terms, conditions, and restrictions governing rental and use of the 
booths. As part of its filing, the CBOE also proposes amending its 
current Fee Schedule as such pertains to Facility Fees for rental of 
Exchange trading floor booths.
    The text of the proposed rule change is available at the Office of 
the Secretary, the CBOE, and at the Commission.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the CBOE included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The CBOE has prepared summaries, set forth in sections 
(A), (B), and (C) below, of the most significant aspects of such 
statements.

(A) Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    The purpose of the proposed rule change is to memorialize for 
distribution to the CBOE membership the Exchange's policy regarding the 
rental and use of booth space on the CBOE trading floor by member 
organizations. The rule change also is intended to amend the existing 
fee structure with respect to the rental of trading floor booths to 
reflect the Exchange's elimination of a practice called ``joint 
leasing.'' The elimination of this practice is the only major change in 
current policy with respect to booth rental.
    The CBOE currently has certain space located on its trading floor 
which it makes available for rental to qualified member organizations. 
These ``booths'' are located at various points on the floor adjacent to 
the trading ``pits'' or ``crowds'' where the actual CBOE trading 
activity takes place. They generally are used by member organizations 
to perform various functions in support of their CBOE trading 
activities. Over the years, the CBOE has developed certain policies and 
practices with regard to the rental and use of these trading floor 
booths by member organizations. The Exchange has determined that it 
would benefit both the CBOE and their membership to memorialize the 
Exchange's current policies for distribution to the members.
    Although the Policy itself addresses several issues pertaining to 
booth rental, it deals primarily with eligibility. Specifically, it 
sets forth the four broad categories of member organizations that, in 
accordance with current policy, may rent booth space on the floor. 
These categories were formulated so as to accommodate member 
organizations having the greatest need of working space in close 
proximity to CBOE trading activity, and they encompass almost all major 
types of CBOE member organizations. Market-maker organizations, the 
only major category that would not obtain a booth under the Policy, 
customarily obtain boot space through their clearing firms. The 
Exchange's experience confirms that this practice has worked well.
    The Policy also addresses the potential future need for the 
adoption of allocation and assignment guidelines with respect to booth 
space. The CBOE has no such guidelines in effect today and currently 
does not envision implementing any in the foreseeable future. In the 
event that demand for booth space at some point exceeds availability, 
the CBOE would establish allocation guidelines.\1\ The CBOE thought it 
advisable to inform the membership of the possibility and to identify 
the general nature of the criteria upon which such guidelines would be 
based.
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    \1\Such guidelines would have to be filed with the Commission as 
a rule change and approved pursuant to section 19(b) of the Act.
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    Finally, the Policy sets forth the requirement that all member 
organizations renting booths execute a ``Trading Floor Booth Rental 
Agreement'' which sets forth the contractual terms governing the rental 
and use of the booths by the member organization. Although the Exchange 
in the past has used a standard form agreement regarding booth rental, 
that agreement is brief and contains little detail regarding the nature 
of the contractual relationship between the parties. The revised 
Agreement specifically sets forth the details of the parties' 
contractual relationship regarding rental and use of the booths as they 
have been established by custom and usage in the past. Among other 
provisions, the Agreement includes specific provisions delineating the 
termination rights of both the member organization and the Exchange and 
establishes a formal procedure for adding booths to and deleting booths 
from the Agreement. Such booth changes, which are common, previously 
have been handled informally, ad hoc. The Agreement also imposes an 
obligation on the member to indemnify the Exchange for any claims, 
liabilities, or other losses the Exchange may incur as a result of the 
use of the booth by the member, and it spells out requirements 
respecting the member's use of the booths, such as those governing the 
installation of equipment, the conduct of business, and access of 
persons to the booths.
    Apart from the addition of detail to the Agreement, the only 
principal change in current Exchange practice embodied in the Policy 
and the Agreement is the elimination of a practice called ``joint 
leasing.'' Previously, the Exchange has permitted two different member 
organizations to occupy jointly a single trading floor booth and to 
share the costs associated therewith. The Exchange believed that joint 
leasing would make it easier (i.e., less costly) for smaller member 
organizations to have access to multiple locations adjacent to the 
trading floor. In practice, however, joint leasing has been used by 
non-transaction producing members solely to reduce their booth fees and 
not to facilitate trading activity. Therefore, the Exchange has 
determined that joint leasing should be eliminated and replaced with a 
variable fee arrangement that will soften the economic impact on small 
member organizations that the elimination of joint leasing might 
otherwise have. Under the proposed fee change included in this filing, 
current booth fees have been reduced in two respects: First, the $1,250 
per booth variable monthly fee has been eliminated for the second booth 
leased by a member organization. Second, the $1,250 per booth variable 
monthly fee on a member firm's third booth has been reduced by fifty 
percent (50%) to $625. The full variable fee will continue to be 
applicable to any booths leased by the firm beyond the third booth.
    The Exchange believes that the proposed rule change is consistent 
with section 6(b) of the Act in general, and furthers the objectives of 
section 6(b)(5) in particular, in that it is designed to codify 
Exchange policy and procedures with respect to the rental of trading 
floor booths by CBOE members in a manner that promotes just and 
equitable principles of trade, fosters cooperation and coordination 
with persons engaged in regulating, clearing, settling, and processing 
information with respect to and facilitating transactions in 
securities, and protects investors and the public interest.

(B) Self-Regulatory Organization's Statement on Burden on Competition

    The CBOE does not believe that the proposed rule change will impose 
any burden on competition.

(C) Self-Regulatory Organization's Statement on Comments on the 
Proposed Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
the self-regulatory organization consents, the Commission will:

    (A) By order approve such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing. Persons making written submissions 
should file six copies thereof with the Secretary, Securities and 
Exchange Commission, 450 Fifth Street, NW., Washington, DC 20549. 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for inspection and copying in the 
Commission's Public Reference Section, 450 Fifth Street, NW., 
Washington, DC. Copies of such filing also will be available for 
inspection and copying at the principal office of the CBOE. All 
submissions should refer to File No. SR-CBOE-94-03 and should be 
submitted by April 6, 1994.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\2\
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    \2\17 CFR 200.30-3(a)(12) (1993).
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Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 94-6037 Filed 3-15-94; 8:45 am]
BILLING CODE 8010-01-M